Fed may disappear inside its shell this week

Some Fed watchers think the central bank will employ a "turtle strategy" and disappear inside its shell this week regarding its plans for tapering its monetary-policy stance. The minutes of the Fed's last meeting indicated that Fed officials would very much like to start slowing down the pace of quantitative easing program, given concerns about potential costs of the program.

Greg Robb
June 17, 2013, 1:50 PM
Market Watch

Many experts have told MarketWatch that they are expecting greater transparency from the Federal Reserve this week regarding its plans for tapering and eventually exiting an easy monetary-policy stance.

But other Fed watchers think the central bank will employ the turtle strategy, as in disappear inside its shell.

“We think there will be very little new information at the upcoming press conference,” despite “the brouhaha” over whether Fed Chairman Ben Bernanke will attempt to walk back the movement in rates witnessed since his now infamous statement that the central bank could reduce the pace of asset purchases in the next few meetings, wrote Tom Porcelli, chief U.S. economist at RBC Capital Markets LLC.

Dean Maki, chief U.S. economist at Barclays, agreed that the Fed will hunker down. In an interview, he said the central bank has “no incentive” to limit its options at this point.

“There is no reason to make new promises about tapering. They are very much in data-dependent mode,” he said.

Interestingly, Maki said he believes Bernanke knew what he was doing when he made his “few meetings” comment.

The minutes of the Fed’s late April meeting indicated that Fed officials were alarmed that bond traders had pushed out the first tapering into 2014, he noted.

“This was further than the Fed had anticipated,” Maki said.

Many at the Fed would very much like to start slowing down the pace of purchases, given concerns about the potential costs of the program in terms of financial stability, Maki explained.

“Bernanke was alerting markets to that fact,” Maki said.

Porcelli agreed that the Fed has not acted the least bit concerned about recent market moves in the wake of Bernanke’s comments.

Maybe Fed officials share the view of former Minneapolis Fed President Gary Stern, who told MarketWatch last week that the increase in the 10-year Treasury rate 10_YEAR +1.87% since Bernanke’s comments was “hardly earth-shaking.”

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